Hence proper strategies for acquiring land resources

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Hence, proper strategies for acquiring land resources are very important to an REE. The complicated development process inherent in real estate projects requires the employment of many different professionals and technical experts. These individuals are vitally important. Their expertise crosses numerous disciplines and knowledge areas including: obtaining land-use rights, planning and design, project financing, project management and marketing management (Cong and Wang 2004). Acquiring these essential skilled resources is another challenge for developers. Real estate development is subject to high risk but with the expectation of high return (Tay and Tay 2007). The future is uncertain and many events may affect the expected outcome of a real estate development. As previously discussed, real estate projects generally involve a long production process. Unsurprising, these lengthy and involved processes present various risks such as changes in governmental policies, changes in interest
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19 rates and changes in the market environment (Van der Krabben and Lambooy 1993). Although it is impossible to list of all of the possible risks in a real estate development project, defining risk categories allows us to structure risk identification and gain insight into those risks. Various authors (Miller and Lessard 2000; Bing 2005; Risnun Instituut. 2005; Ng and Loosemore. 2007) define real estate risk categories as technical, financial, legal, political, physical, social, and organisational. Risks can also be categorised as organisational, project-related and environmental, or macro level (exogenous), meso level (endogenous), and micro level (stakeholder relationships (Baloi and Price, 2003; Bing et al., 2005; Mbachu and Vinasithamby, 2005). Others assign risk to the parties in the process (Kumaraswamy 1997; Rahman and Kumaraswamy 2002). Additionally, real estate development risk can be categorised into seven types according to the steps in the real estate development process. These categories, including a few examples of the risks associated with each of these steps, are summarised by Ellen Gehner (2008) as follows: Land development risk: e.g. land cannot be purchased - i.e. land prices are disproportionately high considering land conditions and the current Zoning plan; Design risk: e.g. program of requirements cannot be realised or the design cannot be kept within budget due to delays as a result of changes imposed by the market or the planning application process; Entitlement risk: e.g. lack of approval of the zoning plan or building permit;
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20 Financing risk: e.g. financing cannot be arranged; Construction risk: e.g. tendered construction costs exceed the budget or there is a delay in the construction process; Leasing risk: e.g. time-to-market lags behind schedule and as a result the design does not meet the current demand of the space market (e.g. a decrease in rental prices) due to economic fluctuations or changes in market supply; and, Sale risks: e.g. incorrect estimate of yield development.
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